Resale Restriction Scenario

[kboo]

Given the inherent limitations of the new restrictions and the impact that will likely have on use, anyone buying Riviera resale will likely be more informed than the average Disney timeshare buyer who bought on a whim at the park, and will be hyper-aware of those restrictions.

The laissez faire booking behavior some are describing (not the concerns DougEMG raises) during the 7-11 might be a more common usage pattern of the on-the-whim-direct buyer. And for that group it’ll be a non-issue.

If I were a Riviera resale buyer, I would; one, have a strategy of use that includes contingencies post-7-month, post-4-month, and post-1-month; two, avoiding using banked/borrowed points; and three, price this inconvenience into my valuation. Anyone going in otherwise will do so to their own detriment.

I agree 100% that the vast majority of RIV resale buyers will know what they're getting into, and will price their offers according to their own valuation of that risk. That said, many of such RIV buyers will also be aware that renting a spec reservation might be a decent contingency plan.

I consider myself a pretty savvy resale buyer, and I went from "I'll pick up resale points on the cheap in 2020, 2021, whatever ..." to buying a pretty sizable chunk of points direct. Why? Largely because of the resale restriction! I "needed" more points anyway, RIV as a whole was appealing, and buying direct makes the resale restriction someone else's problem, not mine.

And a savvy RIV resale owner will *have* to treat their points differently. I think there are enough on-the-whim direct buyers (at all the resorts) --- just look at some of the posts in Other Social Media Groups That Shall Not Be Named --- that owners booking in the 7-11 mo window who do it with some thought and planning should be fine. At worst, I'm guessing, it will feel like trying to book at VGF as a direct owner - if you want certain tough times, you had better be ready to walk or book at 8am on the dot for some times.

As for OP's issue of revising a trip on short notice - it's not as if DVC is the ONLY place to stay. I have planned trips for myself and others on very short notice. Sometimes we just don't use our DVC points because it's not a good use of them, even if there are rooms available. We took a trip last September that we planned 1 month in advance - we had the points and there were rooms available at SSR, but we used points at the Swan because of the location (and there were reasonably priced cash rooms available). Other times I've booked airfare after securing the hard-to-get room, and we stayed an extra night at the Hyatt at MCO because the cost of the Hyatt room was less than half the cost saved by flying in a day earlier. Whatever, shrug.... my point is, people will adjust their behavior to the changes.

 

[kboo]

This is a very important factor to anyone choosing to buy resale at Riviera. I hadn't even thought of this scenario and is a very likely one. I don't think anyone realizes how problematic these restriction really are. It will all come out in the wash and the only thing that could counter balance the restrictions will be a very low resale price.

Or you waitlist the rooms you need, and make a cash booking that can be canceled or modified on 24-48 hours' notice. I don't think we'll see a very low resale price for a while, if ever, because the invisible, not-rational hand of ROFR will still be playing a role.

Here's another thing:

Say someone bought 200 points at $170/pp direct bec of developer incentives (I think the real pp cost was lower than that). Say they use their 200 points to stay 5-ish nights in a 1BR std or a weekish in a preferred studio over a random spring break - not hard to get as a direct owner, and then find themselves in some bad financial circumstances and have to sell their contract. Say they sell at $30pp less ($140pp) a year into owning it - not including MFs, they would have sold at a $6,000 loss, but had a nice stay out of it. Certainly not a great financial situation, definitely not a moneymaker, but it's not horrible.

 

[DougEMG]

Resale restrictions on the new resorts, where people can ONLY use their DVC at their home resort, is going to put an unnecessary burden on EVERYONE who owns that resort. How? Well, first of all, there are only 28 Tower Studios. These will, of course, be booking out 'instantaneously' for almost ALL days. So, that will contribute to an atmosphere of lack of availability and options. And this sense of lack of availability will cause people to book out earlier, more often, which will create even less room availability. And if you want to travel in a popular time of the year, and you can't get what you want, because everyone else booked it at 11 months, then you will definitely have less flexibility.

Now, until they start reselling contracts, everyone at Riviera will be able to go to Riviera, OR exchange out to another resort. Since a large percentage of people (I don't know, maybe HALF of the owners?) will be exchanging out, that means that half the rooms which potentially might have been booked in the 11 month window, might not be be booked during that time. Or at least, some of the less popular rooms and views won't be booked. Especially since the original owners will know that they will 'always be able to get SSR or OKW or even AKL' But those options won't be available for the resale owners.

So there will be lots of availability while there are no resale owners, but, once they start getting resale purchasers, those owners will only be able to use Riviera and this will create a climate where it is even more difficult to get what you want. Suppose 20% of their owners are resale owners. This is probably not an unreasonable number after it has been open for 15 years. But these owners are going to need to book ONLY Riviera, and they will be doing it mostly in the 7 to 11 month window. Why? Because once Riviera reaches the 7 month window EVERYTHING THERE is likely to book up quickly. Similar to what you see at Grand Floridian or Beach Club or Boardwalk. So they will be getting reservations early, in order to make sure that they ARE able to get reservations at all. Since they will be taking a lot of the rooms available in the 7 to 11 month window, the Direct Owners at Riviera who were planning on trading out will worry that maybe they won't be able to trade out easily, so they will also be jumping harder into the 7 to 11 month window. So the 7 to 11 month window will fill up early, and people will find that there will be a lot less options, a lot less rooms available for them, for whatever their preferred vacation time is. Everyone will be grabbing whatever they can in the 7 to 11 month window, because of fear they might not have anything. This means that owners who purchased Direct will absolutely NEED to plan 10 and 11 months ahead, or they will be locked out of the desirable rooms. That is harder and less pleasant for them.

There is one more thing that the Resale Restrictions will create, that I don't think Disney has considered. That is, MORE RENTAL ACTIVITY IN RIVIERA. Look at it this way. Suppose you are a Resale Owner who was unable to book during the 7 to 11 month window, OR, your plans changed after you booked, and now it is within the 7 month window and everyone else at DVC who wants to stay at Riviera has booked up every available room. So, you have NOTHING. You CAN'T book anywhere else, and you can't book at Riviera because there is nothing left. So, maybe, you bank your points into next year, or maybe you just go ahead and contact David's and rent your points out, so you can get SOME benefit for them. So, even though renting your points out was not your first choice, it becomes your only viable choice. And if you bank those points, well then next year, you will still have the same problems you had this year, but DOUBLE, with twice as many points that you now use. So, even if you banked them, that just means that you are probably more likely to rent them out next year.

More unintended consequences. I wonder what Disney thinks of this.

I suspect that walking is going to be a big problem at Riviera. As more owners become resale owner, they are going to want to book as early as possible so they can use their points. This will then force direct owners to do the same thing, which will eventually cause owners to start walking.

This resale restriction is going to cause a huge mess with the entire system for both direct and resale owners.

This kind of thing is real easy to simulate given all the data that Disney has on how long people own for, how early they book and how often they switch resorts. I would bet that Disney has a pretty good idea of the effect this will have (just like the effect of allowing small contracts and building bungalows and cabins), but the chance it will increase direct sales is way more important to them.

I still think that when you are getting in a 50 year business deal with someone, stability and risk management is extremely important. With all the changes lately both of those seem to be lacking.

 

[DougEMG]

By the way, I know it has only been on sale for a month, and I fully expect that month probably went pretty well for Disney. There probably was a lot of pent-up demand for Riviera, because people have been seeing it coming, and deciding to buy it, for a long time. BUT, does anyone have an actual sales figures? How was the first month's sales compared to the first month of, say, Copper Creek or Poly?



Rising Membership Dues/Maintenance Fees is the great bug-a-boo of Timeshare. It ALWAYS HAPPENS and it ALWAYS RISES FASTER THAN INFLATION, mostly because the companies find they can shift more and more of their own expenses onto the backs of the Timeshare owners. Increasing maintenance fees is the single greatest reason for people to sell, unload, drop or 'give back' their timeshare. In my own experience, in one timeshare I owned, I turned it back in to the company I bought it from, after paying on it for a few years, because my financial circumstances changed (I went back to school) and I couldn't afford the maintenance fees. They were nice enough to take it back, with no penalty, other than the fact that I lost all the money I had paid into it. My own second experience with that is when I took over a timeshare contract that had been purchased by my daughter. She got divorced and couldn't afford the maintenance fees. Since that time, I have purchased some pretty good timeshare, for pennies on the dollar, literally (about 12 cents for points that originally cost more than $3 per point. So, it worked out to me paying about 4 cents on the dollar) because people couldn't afford the maintenance fees. AND, I have had Timeshare Brokers willing to GIVE ME FREE TIMESHARE, already paid for, in Orlando (a desirable destination), if I would just take over the maintenance fees. The people were that desperate to get out from under it.

Anyway, if maintenance fees keep going up at DVC at a rate which is at least double the inflation rate (and about 3 to 4 times the inflation rate this year), then it becomes quite clear that MANY MANY PEOPLE WILL NOT BE ABLE TO CONTINUE TO AFFORD THEIR DVC, and they will have to sell it. Let alone dealing with scenarios such as failing health, or passing it on to children who are less affluent, and less able to afford the membership fees.

The one hope that I have with MF is that Disney has a vested interest in ensuring that owning DVC saves money over staying at their deluxe hotels. With only 50 year leases, there will eventually come a point were Disney will always have a new or re-modelled DVC resort to sell at WDW. They won't be able to do that if there aren't any cost savings there. This is something that other timeshares really don't care about, so the model is a little different. At least that is my hope.

 

[Chuck S]

Given Doug's scenario of relatively last minute changes because of a flight, if I was a resale buyer at Riviera, I would likely just try to book a value room for the extra nights. I've done that before when I found prices were a lot cheaper if I changed a flight to a later fly-hone date, as there were no studios available at OKW (which is where we were staying). There were other DVC locations we could have used, but didn't want to have the bed/sofa combination.

But, given that other resale buyers also can not trade into Riviera, we really don't know what availability may be...they may have rooms available later, like OKW or SSR.

 

[RaymOOOnd]

The one hope that I have with MF is that Disney has a vested interest in ensuring that owning DVC saves money over staying at their deluxe hotels. With only 50 year leases, there will eventually come a point were Disney will always have a new or re-modelled DVC resort to sell at WDW. They won't be able to do that if there aren't any cost savings there. This is something that other timeshares really don't care about, so the model is a little different. At least that is my hope.

Can they just raise the cash prices of the rooms and continue to call DVC "savings"?

I think I had a single marketing lecture in my life but the one take-home point was that the full price items in a store exist 90% to make the sale items look like a bargain

 

[Chuck S]

Can they just raise the cash prices of the rooms and continue to call DVC "savings"?

I think I had a single marketing lecture in my life but the one take-home point was that the full price items in a store exist 90% to make the sale items look like a bargain

There is no doubt that cash room rates will go up, they have done so for the last several years. There have been some good specials, like after 9/11 but right now really goos room rate specials are few and far between, and with all the renovations in the parks, I don't see a lot of room specials happening for 3 or 4 years, at least as long as the economy overall doesn't nosedive.

 

[sndral]

...
Say someone bought 200 points at $170/pp direct bec of developer incentives (I think the real pp cost was lower than that). Say they use their 200 points to stay 5-ish nights in a 1BR std or a weekish in a preferred studio over a random spring break - not hard to get as a direct owner, and then find themselves in some bad financial circumstances and have to sell their contract. Say they sell at $30pp less ($140pp) a year into owning it - not including MFs, they would have sold at a $6,000 loss, but had a nice stay out of it. Certainly not a great financial situation, definitely not a moneymaker, but it's not horrible.

I seem to recall that a fairly high percentage of direct buyers finance their purchases - in your scenario the suddenly financially distressed owner would have to bring money to the table to sell if they’d borrowed to buy, depending on the resale market, they might have to bring a lot of money to the table - money they probably don’t have if finances triggered the need to sell. We saw a lot of foreclosures during the last recession for that reason, the resale value dipped so low that people couldn’t even sell and break even so their out was foreclosure or deed backs to DVC.
I’m very curious about how the resale market for Riviera will perform. I know how I’d value resale points there, but I’m fiscally conservative and not prone to impulsive purchases and thus my ‘take’ on it may be skewed by my bias.

 

[kboo]

I seem to recall that a fairly high percentage of direct buyers finance their purchases - in your scenario the suddenly financially distressed owner would have to bring money to the table to sell if they’d borrowed to buy, depending on the resale market, they might have to bring a lot of money to the table - money they probably don’t have if finances triggered the need to sell. We saw a lot of foreclosures during the last recession for that reason, the resale value dipped so low that people couldn’t even sell and break even so their out was foreclosure or deed backs to DVC.
I’m very curious about how the resale market for Riviera will perform. I know how I’d value resale points there, but I’m fiscally conservative and not prone to impulsive purchases and thus my ‘take’ on it may be skewed by my bias.

Agreed - one of my VGF resale contracts was like that, the sellers had to bring money to the table to close, which slowed down the closing. But it also set the floor below which the sellers simply couldn't/wouldn't go below. In that situation, ROFR might have been a game of chicken with the sellers and Disney, too. If they accepted a price too low, and Disney passed on it, they would still have to come up with money to close.

I will say that looking at the earlier recorded deeds for RIV, a large percentage of them were still financed, but most of the early sales were still to current owners, so I'm hoping that they know/understand what they're getting into, and that they'd successfully bought with or without financing before. It will be interesting to see what happens if we do end up in a recession. As for me, maybe I will feel like we paid too much for our points if resale prices take a huge nosedive, but then again, I know I bought in earlier because I wanted to stay at RIV sooner rather than later, and we are not planning to resell any time soon. I'd rent a reservation on the cheap sooner than that. (And being in recession proof jobs and not having financed helps, too.)

 

[DougEMG]

Can they just raise the cash prices of the rooms and continue to call DVC "savings"?

I think I had a single marketing lecture in my life but the one take-home point was that the full price items in a store exist 90% to make the sale items look like a bargain

For me, the whole point of owning DVC is to save money on the equivalent room, when that stops happening, I'll sell. What I'm comparing to are the Disney resorts after the discount and to the DVC rental rate. I'm already well past my breakeven point, so whatever I sell it for if I have/want to sell is all just a bonus.

 

[CarolMN]

Disney seldom (if ever) decreases prices on anything. If rooms (or whatever) are not booking to their satisfaction, they offer discounts and incentives (such as "free dining" or 6 days for the price of 5, etc.). This certainly has held true for DVC prices. Fewer or no incentives apparently goes over better to the consumer than does a rising price. Another example of this concept is decreasing the quantity in a package and keeping the same price.

 

[kboo]

Another example of this concept is decreasing the quantity in a package and keeping the same price.

Slightly OT - Haagen Dazs did this with their ice cream some years ago and it still makes me angry.

 

[Chuck S]

Or like when a pound of coffee really was a pound of coffee.

 

[Frederic Civish]

This analogy does make sense, but if this was truly DVC's concern then why don't they put in a buy back clause in all contracts-- they buy your contract back at a certain percentage of current direct prices -- then DVC is free to resell the points at direct price.

This would completely eliminate the resale market, people could still get out of their contracts when life gets in the way. BUT -- this would mean DVC is sitting on a ton of points until they sell them for their absurdly high cost (such as the PVB contract i just bought for $14500 which direct would have cost me $23500 (heck no would I pay that!)

Timeshare Sales is a labor intensive, advertising intensive, expensive process. These things eat into the profits from selling timeshares, and I think they would greatly limit the profits Disney can make from resales.

There are some figures that show that, on an average, about 1/5th of the contracts registered are RESALE CONTRACTS. This means that about 20% of the contracts sold every year are Resale. That is a lot of contracts. True, it means that Disney is still selling 4/5ths of the contracts, Direct, but if they had to buy back those 1/5th of contracts, even at, say, 65%, compared to Direct prices, then they would have a bunch more contracts to sell, with only a 35% upside margin, compared to their Direct sales. Clearly, they would rather make 100% of the profit from Direct sales, rather than having to settle with 35% of the profit from resales that they bought back. That is one of the main reasons that Disney doesn't just go hog wild over ROFR contracts. There IS money to be made there, but not much.

 

[chalee94]

I consider myself a pretty savvy resale buyer, and I went from "I'll pick up resale points on the cheap in 2020, 2021, whatever ..." to buying a pretty sizable chunk of points direct. Why? Largely because of the resale restriction! I "needed" more points anyway, RIV as a whole was appealing, and buying direct makes the resale restriction someone else's problem, not mine.

But if your circumstances change with job loss, divorce or health issues - things that no one really predicts or plans for - the resale restrictions may become your problem.

I also believe you misunderstand how ROFR works, but this will be a good test case. I don't think ROFR is going to prop up resale prices for Riviera if the restrictions are considered as draconian as I believe them to be.

 

[Wakey]

You haven’t taken a tour lately. When restrictions are brought up now (in light of Riviera’s restrictions), the company line is that the restrictions were introduced to stem the abuse of the resale market and resale buyers buying in below market value and “abusing the system.” That exact term was used with me recently.

If you want to see how resale buyers are vilified as the scourge responsible for all that ails the Disney timeshare system, you need not look any further than your guide or the official facebook group.

It’s not hyperbole. This is what Disney is pedaling.

Wow Bing I am shocked by this.

 

[Bing Showei]

Wow Bing I am shocked by this.

Can’t tell if you’re being facetious Wakey, but ever since the restrictions were introduced, this has been the standard position by the guides; that they’ve heard from the membership about the problem resale owners have caused and now they’re addressing it.

The “abusing the system” line may have been a little ad lib on the part of the guide, but it’s in keeping with how guides are addressing the question of restrictions.

 

[Wakey]

Can’t tell if you’re being facetious Wakey, but ever since the restrictions were introduced, this has been the standard position by the guides; that they’ve heard from the membership about the problem resale owners have caused and now they’re addressing it.

The “abusing the system” line may have been a little ad lib on the part of the guide, but it’s in keeping with how guides are addressing the question of restrictions.

No, genuinely shocked they are openly besmirching a large proportion of their members.

 

[summerw]

Talked to my guide. She said they had a meeting just yesterday going over the results of the latest survey and “most owners are very happy with the restrictions.” She also said if the restrictions wind up causing Riviera to be harder to book and it’s not working, “Disney will change them because that’s what Disney does.”

Bless her heart. Disney is lucky to have her.

 

[KAT4DISNEY]

Talked to my guide. She said they had a meeting just yesterday going over the results of the latest survey and “most owners are very happy with the restrictions.” She also said if the restrictions wind up causing Riviera to be harder to book and it’s not working, “Disney will change them because that’s what Disney does.”

Bless her heart. Disney is lucky to have her.